Pathak, J. - (1.) This is an appeal by certificate under Section 261 of the Income Tax Act, 1961 against the judgment of the High Court of Kerala interpreting the words "accumulated profits" in Section 2 (6A) (e) of the Indian Income Tax Act, 1922
(2.) The assessee is the Managing Director of a private limited company called R.K.V. Motors and Timber (P) Limited. The company maintains an account pertaining to him in its books. The accounts showed that as on March 31, 1958 a sum of Rs. 36,546.17 np was due to him by the company. In January, 1959 for the first time he became indebted to the company in the sum of Rs. 3,757.04 np. His drawings increased, and as on March 31, 1959 the total amount due by him stood at Rs. 25,107.22 np. It is also relevant to state that the Balance Sheet of the company as on March 31, 1958 showed a net profit of Rs. 18,950.98 np.
(3.) The assessee was originally assessed for the assessment year 1959-60 (the relevant previous year being the year ended March 31, 1959) on a total income of Rs. 43,407. Thereafter, the Income-tax officer came to know that the assessee had been withdrawing moneys from the company, and in the belief that those amounts were liable to be treated as "dividend" under Section 2 (6A) (e) of the Indian Income Tax Act, 1922, he reopened the assessment by virtue of Section 147 of the Income Tax Act, 1961. In the assessment proceeding which followed, the assessee claimed that the accumulated profits of the company amounted to Rs. 1,050/- only, and that amount alone could be considered as "dividend" under Section 2 (6A) (e). The figure was worked out on the basis that a sum of Rs. 11,000/- as a provision for tax and of Rs. 6,900/- as a provision for dividend had to be adjusted against the balance of Rs. 18,950/- in the profit and Loss Account. The Income-tax officer rejected the contention of the assessee and determined a sum of Rs. 25,107/- as dividend under Section 2 (6A) (e). He arrived at this figure by including the current profits of the company for the account year ending March 31, 1959. The Appellate Assistant Commissioner dismissed an appeal filed by the assessee. The Income-tax Appellate Tribunal, in second appeal, upheld the claim of the assessee that the words "accumulated profits" in Section 2 (6A) (e) could not be construed as including current profits, but it rejected the contention that the two sums of Rs. 11,000/- and Rs. 6,900/- had to be taken into account in determining the figure of the accumulated profits. Accordingly, it determined the accumulated profits at Rs. 18,950/-;